Asking stock market pros: Is it bear season on Wall Street?

The Standard & Poor’s 500 index soared 32.4% in 2013 and jumped another 13.7% last year, but stocks have been struggling to gain momentum so far in 2015. As part of our third-quarter 2015 Bankrate Market Mavens survey of leading financial market analysts, we asked: What is the probability that stocks will move into a bear market in the next 12 months?

What they said:

“50%. Since growth is not strong and monetary policy will create a headwind, the prospect for a bear market will get more likely.“

— Robert A. Brusca, chief economist, FAO Economics

“40%. While I do not expect a bear market over the next year, I think there is a chance we will see one, given the underperformance we see in the transportation-related stocks. For this market to move measurably higher, we will need to see better action in the transports.“

— Chuck Carlson, CEO, Horizon Investment Services

“If interest rates increase a lot (which I do not expect), then there’s a 60% chance we will finally get a stock market correction. The Federal Reserve’s 0% interest rate policy has been a catalyst for enormous risk-taking and a huge driver of mergers and acquisitions. We will look back and see that many of the M&A deals were done at the market top and that share repurchases squandered sacred cash, which degenerated corporate balance sheets.“

— Marilyn Cohen, president, Envision Capital Management

“40%. Given the important role that monetary policy has played in boosting asset prices, it only makes sense that the removal of stimulus could result in some volatility. This volatility could be avoided if, for instance, Congress were able to provide some fiscal stimulus in the form of corporate tax reform.“

— Michael K. Farr, president and CEO, Farr, Miller & Washington

“50-50. No one knows this. Value investors tend to like to buy during bear markets — our game is to buy low, sell high. What could cause (a bear market)? Events outside of the market: natural disasters, terrorism, etc. Or perhaps if the Federal Reserve tightens too fast, too much. This seems unlikely, though, as every speech from a Fed representative seems to want to assure markets that that won’t happen.“

“50-50. We may very well be in a bear market by June 2016 . Valuations are high, economic growth is struggling. (Other reasons include the) election cycle, monetary, economic and political issues worldwide.“

— Jeffrey Hirsch, editor in chief, Stock Trader’s Almanac

“15%. The performance of the financial markets collectively since the October correction low and the performance of important monetary and economic variables (including Fed policy, bank lending and money growth, liquidity conditions, and leading indicators for the economy) imply, quite strongly, that the stock market/economic/interest rate cycle has further to go. The principal issue is equity market valuation, which is high and will not allow for ongoing significant upside unless, of course, my/our forecast for earnings is wrong (i.e., low).“

“The risk of a bear market is very small, less than 5%, since economic growth is solid and highly unlikely to falter. The economy enjoys solid fundamentals, some tailwinds from a recovering housing market and an absence of excesses that could derail the expansion.“

“20%. The Fed has been very measured in its move to hike interest rates. Economic numbers in the U.S. continue to move in a positive direction, and companies are quick to react if momentum fades.“

— Tom Lydon, editor, ETF Trends

“10%. With the U.S. expansion starting to pick up, the major risk of a bear market comes from outside the U.S. There are many international risks, but most appear to be contained over the next 12 months or so.“

“80%. The economy is very fragile and could be tipped by any number of economic and/or geopolitical events. Lack of liquidity due to regulations and the Fed’s quantitative easing (bond-buying) will serve to exacerbate the severity of the next bear market.“

— Ken Moraif, senior adviser, Money Matters

“25%. With the continued pickup in employment and wage growth, interest rates rising in a measured manner, and earnings-per-share growth projected to increase over the next year, the fundamental outlook still points to a bear market phase being a low probability happening over the next 12 months, absent a material change in those fundamental expectations.“

— Patrick J. O’Hare, chief market analyst, Briefing.com

“70-75%. Highly likely. The U.S. market has rallied a lot over the past few years, and we see the chances of a significant correction. Expect the S&P 500 to decline over the next one to two years.“

— Jim Osman, founder and CEO, The Edge Consulting Group

“25%. A prolonged bear market is highly unlikely, as low interest rates and reasonable growth remain the key global economic drives. A short-term pullback as a result of geopolitical events is plausible.“

— Oliver Pursche, CEO, Bruderman Asset Management

“10%. I think it’s likely we will see a correction of sorts, but it won’t be sustained because there simply is no alternative for a lot of investors but the stock market right now. Furthermore, the fundamentals of many developed economies are sound — as are the fundamentals of many individual stocks. We have come so far since 2009 that it’s a bit hysterical to think we will see another 40% crash and prolonged recession. There are risks, but they are nothing compared with what we’ve been through.“

— Jeff Reeves, executive editor, InvestorPlace.com

“20%. As the Fed begins to raise rates, we may see added volatility that could trigger an unexpected, temporary bear market. Also, a policy mistake is always possible.“

“30%. The S&P 500 has gone 44 months without a decline of 10% or more. The average since World War II is 18 months. Plus, only two of the 11 bull markets since WWII celebrated their seventh birthday.“

— Sam Stovall, U.S. equity strategist, S&P Capital IQ

“25%. If corporate earnings weaken, that could cause the market to sell off to the point where it would be considered the start of a bear market. China’s slowing economy and a faltering European recovery could also wake the hibernating bear.“

“60%. Monetary policy is diverging across currency areas. That will make exchange rates and international financial flows more volatile. And, the market is aware of the macro-financial vulnerabilities of some emerging markets. Altogether, this makes a recipe for higher risk aversion, higher volatility and lower returns to risky assets. Plus, in the U.S we should see a decline in corporate profits (in levels and in margins).“

“Less than 5%. Expect the bull market to continue through 2015. The economic and market leading indicators we follow … include the Leading Economic Indicators index from the Conference Board, the ISM (manufacturing) index, the yield curve and others, and are all at levels consistent with economic expansion, not recession, suggesting a very low probability of a 2015 bear market. The odds are never zero, but we do not see the economic excesses consistent with the onset of prior recessions that brought on bear markets.“

— Burt White, chief investment officer, LPL Financial

“20%. I believe the U.S. market is poised to spend some time moving sideways as it tries to determine the course of action by the Fed over the long haul. The nature of this market and its dependence on Fed actions rather than fundamentals lead me to believe that it is more sensitive or vulnerable to any exogenous shock.”

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